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Testimony of the Department of the Attorney General Thirty-First Legislature, 2021 on the Following Measure: H.B. No. 1296, H.D

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Testimony of the Department of the Attorney General Thirty-First Legislature, 2021 on the Following Measure: H.B. No. 1296, H.D TESTIMONY OF THE DEPARTMENT OF THE ATTORNEY GENERAL THIRTY-FIRST LEGISLATURE, 2021 ON THE FOLLOWING MEASURE: H.B. NO. 1296, H.D. 1, RELATING TO STATE FUNDS. BEFORE THE: SENATE COMMITTEES ON HEALTH AND ON HIGHER EDUCATION DATE: Tuesday, March 23, 2021 TIME: 3:15 p.m. LOCATION: State Capitol, Room 229 and Videoconference TESTIFIER(S): Clare E. Connors, Attorney General, or Blair Goto, Deputy Attorney General Chairs Keohokalole and Kim and Members of the Committees: The Department of the Attorney General provides the following comments on this bill. The purpose of the bill is to repeal the tobacco prevention and control trust fund (Trust fund) and lapse unencumbered Trust fund moneys as of July 1, 2021, to the general fund. Specifically, section 5 on page 8, lines 3-5, of the bill requires that "[a]ny unencumbered balances remaining in the Hawaii tobacco prevention and control trust fund as of July 1, 2021, shall lapse to the credit of the general fund." Pursuant to section 328L-5, Hawaii Revised Statutes (HRS), the Director of Health, with the concurrence of the Governor, selected the Hawaii Community Foundation (HCF) to invest Trust fund moneys and to implement a community grant program to reduce tobacco consumption. The current HCF contract runs from July 1, 2019, to June 30, 2024. Section 9 of the Special Conditions of the contract with HCF requires a twelve-month wind-down period if, among other things, "[t]he TRUST FUND has been terminated in statute through legislative action." Article I, section 10, of the U.S. Constitution provides, in part: "No State shall . pass any . Law impairing the Obligation of Contracts . ." Accordingly, section 5 of the bill, that requires "[a]ny unencumbered balances remaining in the Hawaii tobacco prevention and control trust 823520_3 Testimony of the Department of the Attorney General Thirty-First Legislature, 2021 Page 2 of 3 fund as of July 1, 2021, shall lapse to the credit of the general fund," may violate article I, section 10, of the U.S. Constitution. The bar of article I, section 10, of the U.S. Constitution is not absolute. "Although the language of the Contract Clause is facially absolute, its prohibition must be accommodated to the inherent police power of the State 'to safeguard the vital interests of its people.'" Energy Reserves Group, Inc., v. Kansas Power & Light, 459 U.S. 400, 410, 103 S. Ct. 697, 704 (1983) (citing Home Bldg. & Loan Ass'n v. Blaisdell, 290 U.S. 398, 434, 54 S. Ct. 231, 239, 78 L. Ed. 413 (1934)). "The threshold inquiry is 'whether the state law has, in fact, operated as a substantial impairment of a contractual relationship.' Allied Structural Steel Co., 438 U.S., at 244, 98 S. Ct., at 2722. See United States Trust Co., 431 U.S., at 17, 97 S. Ct., at 1515. The severity of the impairment is said to increase the level of scrutiny to which the legislation will be subjected. Allied Structural Steel Co., 438 U.S., at 245, 98 S. Ct., at 2723. Total destruction of contractual expectations is not necessary for a finding of substantial impairment. United States Trust Co., 431 U.S., at 26–27, 97 S. Ct., at 1519–1520." Kansas Power & Light, 459 U.S. at 411, 103 S. Ct. at 704. Here, the bill would terminate the five-year contract between the State Department of Health and HCF after two years and would either eliminate or substantially reduce the twelve-month wind-down period. The wind-down period was intended to allow HCF to terminate its grant contracts, account for Trust fund moneys, and redeploy its personnel in an orderly and accurate manner. Although the contract explicitly anticipated termination of the Trust fund by legislative action, elimination of the twelve-month wind-down period may constitute a substantial impairment. If the threshold inquiry is met, i.e., if the bill operates as a substantial impairment of a contractual relationship, then a host of factors must be considered. In a series of cases, the U.S. Supreme Court recognized among them that "the state legislature had declared in the Act itself that an emergency need for the protection of homeowners existed," that "the state law was enacted to protect a basic societal interest, not a favored group," that "the relief was appropriately tailored to the emergency that it was designed to meet," that "the imposed conditions were reasonable," that "the legislation 823520_3 Testimony of the Department of the Attorney General Thirty-First Legislature, 2021 Page 3 of 3 was limited to the duration of the emergency," that the state law had "retroactive effect," that the law was "precisely and reasonably designed to meet a grave temporary emergency in the interest of the general welfare," that "[e]ven when the public welfare is invoked as an excuse, [the law could not cut down] the security of a mortgage . without moderation or reason or in a spirit of oppression," and that in "[e]valuating with particular scrutiny a modification of a contract to which the State itself was a party, the Court . held that legislative alteration of the rights and remedies of . bondholders violated the Contract Clause because the legislation was neither necessary nor reasonable." Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 242-44, 98 S. Ct. 2716, 2721-22 (1978) (emphasis added). Given the complexity of the analysis once a bill substantially impairs a contract, the safer course would be to reduce that impairment. One way to reduce the substantiality of any impairment would be to amend section 5 of the bill to read: "Any unencumbered balances remaining in the Hawaii tobacco prevention and control trust fund as of [July 1, 2021,] September 1, 2022, shall lapse to the credit of the general fund." The new date would allow sufficient time from approval of the bill for the Department of Health to initiate and for HCF to conclude the twelve-month wind-down procedures. In this manner, the potential constitutional problem may be avoided. We recommend that the Committees make the suggested amendment if the decision is to move this bill forward. 823520_3 DAVID Y. IGE ELIZABETH A. CHAR, M.D. GOVERNOR OF HAWAII DIRECTOR OF HEALTH STATE OF HAWAII DEPARTMENT OF HEALTH P. O. Box 3378 Honolulu, HI 96801-3378 [email protected] Testimony in OPPOSITION to H.B. 1296, H.D. 1 RELATING TO STATE FUNDS SENATOR JARRETT KEOHOKALOLE, CHAIR SENATE COMMITTEE ON HEALTH SENATOR DONNA MERCADO KIM, CHAIR SENATE COMMITTEE ON HIGHER EDUCATION Hearing Date: 3/23/2021 Room Number: Videoconference 1 Fiscal Implications: This measure impacts the priorities of the Department of Health (DOH) 2 identified in the Governor’s Executive Budget Request and Legislative Package. 3 Department Testimony: The Department strongly opposes this measure with comments. 4 House Bill 1296, House Draft 1 (H.B. 1296, H.D. 1) would dismantle the comprehensive 5 tobacco prevention and quit smoking services for youth and adults by repealing the Tobacco 6 Prevention and Control Trust Fund (Trust Fund) and the oversight role of the Tobacco 7 Prevention and Control Advisory Board (Advisory Board). The money in the Trust Fund is from 8 tobacco company profits, and exclusively used for tobacco prevention and control. 9 Tobacco use has been linked to diseases in nearly every organ, and nicotine is one of the 10 most addictive substances, and year over year, many keiki and adults in Hawaii are enticed to 11 start and keep using tobacco. The effect of the proposed measure would end the free services 12 through the Hawaii Tobacco Quitline for youth, pregnant women and adults who smoke and 13 vape. County level cessation, youth e-cigarette prevention, community and youth education 14 services provided through non-profit organizations on every island would also cease. H.B. 1296, H.D. 1 Page 2 of 6 1 Despite the declines in the use of combustible cigarette use, each year 1,400 adults in 2 Hawaii will die prematurely, and 1,000 keiki will lose at least one parent from smoking-caused 3 death.1,2 Hawaii annually spends $526 million in direct annual health care expenditures and 4 $387.3 million in worker productivity is lost due to smoking.3 Meanwhile the tobacco industry 5 continues to spend billions of dollars in advertising, $9.06 billion in 2018 alone, and our keiki 6 continue to be enticed and become addicted.4 Where the traditional advertising of cigarettes was 7 visible to parents, keiki now receive e-cigarettes marketing directly to their smart phones from 8 online youth social influencers on social and digital media platforms.5,6 9 The Trust Fund program meets 10 the evolving challenges, is based on 11 public health data, national standards 12 and guidelines, focusing especially on 13 communities impacted by tobacco 14 marketing and use. Adult tobacco use 15 rates and needs vary, see table 1.7 The 16 2019 youth HS e-cigarette use rates were 17 higher by neighbor island counties, see 18 table 2, and rates for students who identify as Native Hawaiian, Pacific Islander, Filipino, and 1 Lortet-Tieulent J, Goding Sauer A, Siegel RL, et al. State-Level Cancer Mortality Attributable to Cigarette Smoking in the United States. JAMA Intern Med. 2016;176(12):1792–1798. doi:10.1001/jamainternmed.2016.6530 2 Leistikow BN, Martin DC, Milano CE. Estimates of smoking-attributable deaths at ages 15-54, motherless or fatherless youths, and resulting Social Security costs in the United States in 1994. Prev Med. 2000 May;30(5):353- 60. doi: 10.1006/pmed.2000.0657.
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